Building or Expanding Community Banks: A Facilities Planning Study Is Key

Barrath, Paul, ABA Banking Journal

As community banks continue their robust growth, one of the most important issues facing bank management is how to address facility needs. Despite the key role that facilities play in the delivery of customer service, there is often a gap in strategic planning regarding the decision to build, expand or relocate bank facilities.

A comprehensive Facilities Planning Study should be the first step in any building initiative involving main office or branch facilities. Information gained through the planning process will help bank management make the right decision about facility design, location and space requirements to best meet current and future customer needs.

Because no two banks are exactly alike, every planning study is different. But a sound strategic plan should include the following components:

Assessing growth opportunities

-- An evaluation of the local financial services marketplace as it relates to the products and services that will be necessary to serve both current and future customers.

-- A review of the bank's financial history, as well as any other significant trends that can be used as a basis for projecting future activity.

-- Development of a long-term strategy that prioritizes facility alternatives from a geographic, staffing, competitive and affordability standpoint.

The performance of the financial services market is generally tied very closely to the strength or weakness of the local economy. The demand for many financial products and services depends on income, changes in population, home construction and the local job market, among other factors. A facilities planning study, therefore, should begin with an examination of the local market economy.

Local competitive activity is another important consideration in weighing the opportunity for future expansion. Faced with growing competition from other community and regional banks, credit unions and non-traditional financial service providers, facility design can be an important factor in helping a community bank establish a strong identity and differentiate itself in terms of service delivery and branding.

Future growth can also be projected based on a historical overview of bank operations. Customer growth, staffing trends and account activity, including activity by account type and account relationships per customer, are important criteria for assessing future needs. Part of the analysis should focus on internal operations, including how departments are organized, how customers are served and what supporting information systems are used.

Management growth strategies will also have a direct bearing on future facility requirements. A growth strategy based primarily on expanding to new markets and rapidly adding new customers will have different implications in terms of space and location requirements than one that seeks to primarily expand account relationships with existing customers.

HBE Financial Facilities recently conducted a facility planning study to support an aggressive branching strategy for First Security Bank in Batesville, Miss. The study focused on a six-county region of northeast Mississippi to help bank management identify profitable expansion opportunities.

The first challenge was to alleviate overcrowding and traffic congestion at First Security's main office location in Batesville. The main office underwent an expansion and remodeling program, and a new, 4,000 square-foot branch facility was built three miles to the east in an area of rapid commercial growth. Both facilities are located on a high traffic section of Highway 6, and the planning study showed that no single site could be configured well enough to effectively handle all the bank's customers.

Since then, First Security has opened a new 7,000 square-foot, full-service branch facility in nearby Olive Branch, Miss., a rapidly growing community south of Memphis, and another identical branch facility is now under construction in Hernando, Miss. …

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